Surge in corporate tax boosts Government’s coffers

An €803 million surge in corporation tax receipts in the last month puts the Government on course to exceed fiscal targets set out in the Budget only three weeks ago.

Exchequer returns for October show that the Government collected €35.05 billion in tax in the first 10 months of the year, €3.08 billion more than in the same period last year and €2.47 billion above target.

Budget 2016 last month was predicated on a year-end deficit of 2.1 per cent of gross domestic product for 2015, but the Government now anticipates the year-end deficit will come in below 2 per cent of GDP.

Figures from the Department of Finance point to an exchequer deficit of €2.18 billion to October down from €8.5 billion in 2014. Although income tax and VAT receipts were behind target in the month, the shortfalls were eclipsed by increased corporation tax payments.

The overperformance in tax returns comes amid lower overall expenditure than forecast, although there were big spending overruns in the health service and the Department of Environment.

The State received €4.75 billion in corporate taxes in the 10-month period, €1.79 billion more than in 2014 and €2.02 billion above the Department’s target. “The over-performance in the year to date is broad based and primarily relates to improved trading and some timing factors,” the Department said.

Income tax receipts reached €13.86 billion to October, a year-on-year advance of €732 million and €95 million above profile. In the month of October, however, income tax receipts were €24 million or 1.7 per cent below target “driven by an underperformance in DIRT” returns.

Similarly, VAT returns in October were €58 million or 14.7 per cent below target at €340 million. Total VAT payments in the first 10 months of the year were €10 million, €716 million higher than in 2014 and €164 million ahead of target,.

The Department noted October was a non-VAT month, saying VAT receipts in the year to date reflect improved consumer confidence and spending as seen in the advance of retail sales

Excise duties also came in behind target in October but the figures show that returns from the local property tax, stamp duty, capital gains tax and capital acquisitions tax were each ahead of target.

Current expenditure to October reached €32.49 billion, €116 million below profile. A €242 million underspend in the Department of the Agriculture relates to early EU receipts, said the Department of Finance

Net current expenditure for health was €422 million or 4.2 per cent above profile at the end of October. Such spending “is expected to continue running ahead of profile until the end of the year,” the Department said.

Total exchequer debt servicing costs at end-October were €6.45 billion, down €333 million year-on-year on when excluding a sinking fund contribution in 2014. The reduction “largely reflects” the benefit of the early loan repayments to the IMF, said the Department.,

“Interest expenditure at end-October 2015, at €6,354 million,m was €532 million or 7.7 per cent below profile. This is primarily due to lower than expected costs on 2015 bond issuance as well as the faster pace of early repayment of the full portion of IMF loans, which were subject to the higher rate of interest.”